Correlation Between Merck and Holcim Argentina

Can any of the company-specific risk be diversified away by investing in both Merck and Holcim Argentina at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Merck and Holcim Argentina into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and Holcim Argentina SA, you can compare the effects of market volatilities on Merck and Holcim Argentina and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Merck with a short position of Holcim Argentina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Holcim Argentina.

Diversification Opportunities for Merck and Holcim Argentina

0.01

Correlation Coefficient

Merck  Holcim Argentina

Significant diversification

The 3 months correlation between Merck and Holcim is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Holcim Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim Argentina and Merck is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Merck Company are associated (or correlated) with Holcim Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim Argentina has no effect on the direction of Merck i.e., Merck and Holcim Argentina go up and down completely randomly.

Pair Corralation between Merck and Holcim Argentina

Assuming the 90 days trading horizon Merck Company is expected to generate 0.64 times more return on investment than Holcim Argentina. However, Merck Company is 1.56 times less risky than Holcim Argentina. It trades about 0.02 of its potential returns per unit of risk. Holcim Argentina SA is currently generating about -0.07 per unit of risk. If you would invest  2,325,258  in Merck Company on December 30, 2024 and sell it today you would earn a total of  14,742  from holding Merck Company or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Merck Company  vs.  Holcim Argentina SA

Merck Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Merck is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Holcim Argentina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holcim Argentina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Merck and Holcim Argentina

The main advantage of trading using opposite Merck and Holcim Argentina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Holcim Argentina can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Holcim Argentina will offset losses from the drop in Holcim Argentina's long position.

The idea behind Merck Company and Holcim Argentina SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.